Officials summon internet bank representatives as demand for unsecured credit surges

All three internet banks missed their household loan targets in May. [Image generated with ChatGPT]
All three internet banks missed their household loan targets in May. [Image generated with ChatGPT]

South Korea's financial regulator has ordered internet-only banks to tighten household loan management after a surge in unsecured credit lending tied to "debt-fueled investment" — borrowing to buy stocks — as the equity market overheats.

Data submitted to People Power Party lawmaker Lee Yang-su of the National Assembly's Political Affairs Committee by the Financial Supervisory Service show that K bank had set a target of expanding its other loans by 201.6 billion won ($131 million) through May this year, but the actual increase reached 277.7 billion won, overshooting the target by 37.7 percent. Toss Bank had planned to cut unsecured credit loans by 75.8 billion won but managed only a 42.2 billion won reduction. Kakao Bank, by contrast, allocated its entire household loan growth target to other loans and disbursed 338.4 billion won of its 413.6 billion won target through May, showing relatively measured pacing.

On mortgage lending, K bank exceeded its reduction target of 257.1 billion won, cutting 266.8 billion won. Toss Bank disbursed 332.6 billion won in mortgages, slightly above its original target of 316.6 billion won. Kakao Bank had aimed to reduce its mortgage book by 132.1 billion won but achieved only a 101.9 billion won cut.

In response, the financial regulator last week summoned representatives from internet banks that had failed to meet their unsecured credit management targets and reviewed their loan management plans. A regulator official said debt-fueled investment lending was rising at internet banks alongside the broader trend, and that the regulator had stepped in because the banks' high accessibility meant credit limits could expand rapidly.

All three internet banks have since moved to respond by reducing credit loan and overdraft limits and restricting new lending.

Kakao Bank cut its maximum overdraft limit from 240 million won to 100 million won effective June 22. Starting in July, it will also reduce limits by up to 20 percent on overdraft accounts with a utilization rate of 20 percent or below over the past six months when customers seek to renew facilities of 50 million won or more. Daily application caps are also in place for unsecured credit loans.

K bank suspended new overdraft account openings from June 16 through July 31. It has also moved to cut new credit loan limits for high-income earners.

Toss Bank reduced its maximum unsecured credit loan limit from 300 million won to 100 million won and cut its overdraft ceiling from 150 million won to 50 million won, both effective June 18. For customers renewing overdraft loans, the bank will reduce limits by up to 40 percent on accounts with a utilization rate of 40 percent or below over the past three months, starting July 24.


won@heraldcorp.com